Thursday, April 21, 2011

Molycorp (MCP) (SHZ) (REE) (XING) Close Mixed as Rare Earths Take Breather

Rare earths miners have been moving up quickly since the announcement by China it's going to cut back on exports significantly. Some have been pulling back after the recent surge, as companies China Shen Zhou Mining & Resources, Inc. (AMEX:SHZ), Rare Element Resources Ltd (AMEX:REE), Qiao Xing Universal Resources, (Nasdaq:XING) and Molycorp, Inc (NYSE:MCP) closed mixed Wednesday.

Expectations are rare earth supply will remain tight for at least five years, even with the media hype of all the projects coming on line. Those will take years to go through the process before production begins.

According to Molycorp CEO, Mark Smith, there will probably be two coming on stream within that five-year period. At the same time rare earths demand is estimated to double annually.

That means those companies that already have operations online should enjoy significant pricing power during that time.

As to the foolish proposal by big-government politicians concerning the Rare Earth Supply-Chain Technology and Resources Transformation Act, the last thing we need is for the government to use yet another so-called crisis or "national security" issue to be used to expand government in a useless manner as is being attempted.

The markets should and will sort it out, as it has already began to do.

Molycorp, Inc. closed Wednesday at $71.47, falling $2.49, or 3.37 percent. Qiao Xing Universal Resources closed at $2.03, down $0.02, or 0.98 percent. Rare Element Resources Ltd ended the day at $14.05, dropping $0.07, or 0.50 percent. China Shen Zhou Mining & Resources, Inc. closed at $4.72, rising $0.12, or 2.61 percent.

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